According to the Pakistan Bureau of Statistics (PBS), headline inflation in June reached 12.6% year over year.
This rate surpasses May’s 11.8% increase but remains significantly below the 23.4% average for the fiscal year ending June 30.
Every month, consumer inflation, measured by the Consumer Price Index (CPI), rose by 0.5% in June.
This CPI increase aligns with projections from the State Bank of Pakistan and the finance ministry, which anticipated a rise due to spending during the Eidul Azha holiday.
Inflation has moderated from a record 38% in May 2023, offering some respite to an economy grappling with high inflation and stagnant growth.
The central bank reduced the main interest rate by 150 basis points last month, the first reduction in nearly four years, from a record high of 22%.
Finance Minister Muhammad Aurangzeb anticipates additional rate cuts this year as inflation declines.
Rate reductions are crucial for the government’s strategy to limit its fiscal deficit to 5.9% of GDP, particularly as it deals with substantial interest payments on local debt. This fiscal discipline is central to ongoing bailout negotiations with the International Monetary Fund (IMF).
The government aims to secure a long-term bailout of $6-$8 billion and seeks to finalize an agreement this month following the passage of a tax-heavy budget.
However, the State Bank’s recent monetary policy statement also cautioned about a potential rise in inflation beyond seasonal increases due to anticipated tax measures in the annual budget.
